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IBM Corp. said Tuesday it would acquire Informix Corp.’s database business, Informix Software Inc., in a cash transaction valued at US$1 billion. The move is intended to strengthen IBM’s distributed database business and dethrone chief rival Oracle Corp. as the industry leader.

“We are playing for first place,” said IBM data management software general Manager Janet Perna, in a conference call following the announcement.

IBM intends to merge Informix Software into its existing IBM Software data management division and integrate some Informix technology into future versions of its flagship DB2 Universal Database. IBM said it would continue maintaining Informix’s products and not force existing customers to migrate to IBM’s software, but it also said it would steer new customers toward DB2.

IBM is scrapping Informix’s planned Arrowhead database server, an all-in-one database intended to combine features from an assortment of existing Informix products. The company said it would instead focus its development efforts on DB2.

“What can I say?” he said, when asked about the deal during an unrelated press event Tuesday morning. “We have a billion dollars in cash. We could have bought them too but we were never really interested.”

Oracle 9i, a major upgrade to Oracle’s flagship database, is due to ship May 15, Ellison said. Customers who move away from Informix are more likely to switch to Oracle than DB2, in part because Oracle 9i has improved clustering features that make it more scalable than DB2, he asserted.

Informix customer James Davis isn’t in a hurry to switch anywhere. A vice president of new product development for wireless developer StatSignal Systems Inc., Davis said he hopes IBM will follow through on its promise of continuing to support and develop Informix’s products. Migrating to DB2 “was not part of our original plan. We have a lot expertise with Informix and we’re very happy with its performance,” he said.

StatSignal began using several Informix applications a year and a half ago, including the Informix Internet Foundation package. Davis said he’s not worried about the acquisition yet. “I haven’t read enough information to see what IBM’s real plans are,” he said. “It will be interesting to see what happens.”

The IBM-Informix combination comes just one year after the two firms were swapping inflammatory rhetoric and lawsuits. In February 2000, IBM sued Informix for allegedly infringing on six patents relating to its database software, distributed processing software, and data compression technology. In March 2000, Informix hit back with a counter suit. The case was still unresolved as of March 23, 2001, when Informix filed its annual report with the U.S. Securities and Exchange Commission.

The lawsuits had nothing to do with the current acquisition deal, according to Steve Mills, senior vice-president of IBM Software. He noted that the cases are now moot.

The acquisition comes as Oracle shows signs of hitting a plateau. Oracle’s database business grew six per cent for its third fiscal quarter, ended Feb. 28, while IBM’s database revenue grew 36 per cent year-over-year for the quarter ended March 31.

Gartner Group Inc. Dataquest’s 1999 survey of the worldwide database market had Oracle just barely edging IBM, with 31 per cent of the market to Big Blue’s 30 per cent. But analyst Betsy Burton, who covers the database market for Gartner, said the deal is really about the Unix subset of the database market – where Oracle drastically outpaces its rivals, holding a 60 percent market share to Informix’s 12 per cent and IBM’s 10 per cent.

“In my mind, what IBM has done here is buy market share in the Unix DBMS (database management system) market,” Burton said. “We believe that what IBM is going to do is aggressively go out and migrate those Unix users to DB2, which will give their Unix product line a shot in the arm … In my mind, this is much less about Informix the company and much more about IBM competing against Oracle on the Unix platform.”

Microsoft Corp., a distant third in database market share by most counts, is also stepping up its efforts to increase its share. IBM’s Perna downplayed the threat, dismissing Microsoft as a “one-trick pony” that is doomed to alienate customers by only offering database technologies that run on its own platforms.

But Gartner’s Burton sees Microsoft as a serious contender in parts of the database market. The company holds just 13 per cent of the overall market by Gartner’s estimate, but “the most interesting battle today is between Oracle and Microsoft on the NT product line,” Burton said. In that niche, IBM is barely a blip on the radar screen.

After the sale to IBM is complete, Informix will focus on its other independent operating business, information asset management developer Ascential Software Inc., Informix said. The company plans to change its name from Informix to Ascential Software when the transaction is closed, and to use the proceeds from selling Informix Software to fund Ascential’s growth.

In related news, IBM and Ascential Software announced plans on Tuesday to jointly develop and market information asset management applications based on Ascential’s DataStage, DataStage 390 and Media360 products, as well as IBM’s DB2 and related product lines.

Informix also said it will use a “substantial” portion of the sale’s proceeds to return money to shareholders through a stock-reduction plan, details of which will be announced after the deal closes.

The acquisition is subject to Informix shareholder and regulatory approval. It is expected to close in the third quarter of 2001.